What should one do with investments in UTI Monthly Investment Plan (MIP)? While the MIP 99 gives a return of 10.75 per cent, the MIP 99(II) hurts as the return is just 5 per cent and even less after TDS (tax deducted at source). Should one stick with UTI MIP 99(II) even with this low return or cash it and invest elsewhere?
Sit tight on your investment in UTI MIPs if you do not have an immediate requirement for cash. The government has clearly expressed that it will bail out UTI and meet the gap between the NAV and the minimum assured price of MIPs. To sound more convincing-all the assured return schemes and Unit Scheme-64 will now come under UTI-I, which will be managed by a government appointed administrator and a team of advisers nominated by it. There is one assurance that in October 2004, when the MIP 99 series comes up for redemption, you will get at least Rs 10. In terms of regular dividend, UTI MIP 99, no doubt, is a pure safe play. Returns are guaranteed at 10.75 per cent a year for all the five years and UTI has honoured this commitment till now. It is also likely to continue it in future.
Yes, MIP 99 (II) has not been good for the investors as the returns were assured for the first year only. As promised it gave 10.5 per cent in the first year but the payout has been revised down to 9 per cent for 2001 and reduced further to 5 per cent for 2002. Though this reduced payout hurts a lot, redemption at current levels will give only Rs 7.96 per unit (as on Nov 25, 2002). It doesn't make sense to go in for redemption at present. Redemption at these levels will result in a loss of an assured return of 12.51 per cent, which the government has promised, by bringing the NAV back to the par value of Rs 10 in October 2004. In view of the bailout, staying invested through the life of the scheme is a better option.